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Leibold v. State Farm Mutual Automobile Insurance Co.

United States District Court, D. Alaska

May 17, 2019

MICHELLE LEIBOLD, Plaintiff,
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant.

          ORDER AND OPINION [RE: MOTION AT DOCKET 13 ]

          JOHN W. SEDWICK SENIOR JUDGE, UNITED STATES DISTRICT COURT

         I. MOTION PRESENTED

         At docket 13, Defendant State Farm Mutual Automobile Insurance Company (State Farm) filed a motion for Partial Summary Judgment in which it seeks dismissal of the bad faith claim against it or, alternatively, seeks bifurcation of the bad faith claim from other claims in the complaint. Plaintiff Michelle Leibold (Leibold) responds at docket 19. State Farm replies at docket 20. Oral argument was not requested and would not be of assistance to the court.

         II. BACKGROUND

         On June 1, 2016, Leibold was involved in a three-car accident in Anchorage, Alaska. Leibold was hit from behind and pushed into the vehicle in front of her. Leibold was insured by State Farm and had an auto policy with Underinsured Motorist/Uninsured Motorist (UIM) Coverage of $100, 000 and Medical Payments Coverage of $25, 000. Following the accident, Leibold sought and received Medical Payments Coverage under her policy for injuries to her back, neck, left knee, and right shoulder, as well as for headaches. She continued to receive treatment for residual neck and shoulder injuries throughout 2017 which her State Farm policy covered. In total, at the time of the parties' briefing, State Farm had paid $19, 203.41 for Leibold's medical treatment and had pre-approved medical expenses up to the policy's limit of $25, 000.

         In May of 2018, Leibold reached a tentative agreement with USAA, the insurer of the driver who had caused Leibold's car accident, whereby USAA offered to pay the liability limit of $50, 000 under the driver's policy. In order to finalize the agreement, Leibold needed to obtain a medical payments lien waiver from State Farm to ensure that State Farm would not seek to recoup the medical payments already made under Leibold's State Farm policy. Leibold believed State Farm would provide the waiver because USAA's payment $50, 000-the upper limit of the policy-was not enough to cover her alleged damages and make her whole. She believed that her past and future damages totaled $150, 000. She intended to recover the remainder of her damages from her State Farm UIM coverage.

         Leibold, through her counsel, informed State Farm about the proposed USAA settlement. She asked State Farm for the necessary waiver and stated her intention to file a UIM claim for the remainder of her damages. On August 7, 2018, after a few months of communications between State Farm representatives and Leibold's counsel, State Farm formally declined to issue a waiver, stating that it did not have information to prove that the USAA settlement failed to make her whole.

         Leibold filed this lawsuit against State Farm on August 14, 2018, claiming that State Farm's denial was made in bad faith. Two days after the complaint was filed, State Farm proposed to close Leibold's UIM claim for $5, 000, explaining that it calculated her total past and future damages to be about $74, 000 and therefore, between the $19, 000 already paid plus the $50, 000 from USAA, an additional $5, 000 from her UIM coverage would make her whole. State Farm's proposal to pay $5, 000, in addition to what it had already paid for her medical care and what Leibold would receive from USAA, effectively waived any medical payment claim lien it had previously asserted. That is, State Farm's calculations and ultimate offer conveyed its intent not to recoup past medical payments. Leibold asserts that this after-the-fact proposal supports her bad faith claim against State Farm, arguing that its post-complaint offer demonstrates that State Farm "tr[ied] to leverage waiver of the [medical payment claim] in exchange for closure of the plaintiff's UIM . . . claim."[1]

         III. STANDARD OF REVIEW

         Summary judgment is appropriate where “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”[2] The materiality requirement ensures that “[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.”[3]Ultimately, “summary judgment will not lie if the . . . evidence is such that a reasonable jury could return a verdict for the nonmoving party.”[4] However, summary judgment is mandated “against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.”[5]

         The moving party has the burden of showing that there is no genuine dispute as to any material fact.[6] Where the nonmoving party will bear the burden of proof at trial on a dispositive issue, the moving party need not present evidence to show that summary judgment is warranted; it need only point out the lack of any genuine dispute as to material fact.[7] Once the moving party has met this burden, the nonmoving party must set forth evidence of specific facts showing the existence of a genuine issue for trial.[8]All evidence presented by the non-movant must be believed for purposes of summary judgment, and all justifiable inferences must be drawn in favor of the non-movant.[9]However, the non-moving party may not rest upon mere allegations or denials but must show that there is sufficient evidence supporting the claimed factual dispute to require a fact-finder to resolve the parties' differing versions of the truth at trial.[10]

         IV. DISCUSSION

         A. Request for Summary Judgment on the Bad Faith Claim

         Leibold alleges that State Farm's handling and denial of her request for a medical payments lien waiver constitutes a breach of the duty of good faith and fair dealing. She alleges that State Farm delayed its response to her request for a waiver and that State Farm then denied her request without an investigation into her assertion that the USAA settlement failed to make her whole and without a reasonable basis. Leibold alleges State Farm's denial of her request for a waiver was used to compel her to resolve her UIM claim on terms more favorable to State Farm.

         Alaska recognizes a cause of action against insurers for a breach of the duty of good faith and fair dealing.[11] "Although [the Alaska Supreme Court has] declined to define the elements of the tort of bad faith in an insurance contract, [its] precedent makes clear that the element of breach at least requires the insured to show that the insurer's actions were objectively unreasonable under the circumstances."[12] To prove bad faith, the insured must show that the insurer's delay or denial of a claim was "made without a reasonable basis."[13] While an insurer does not act in bad faith simply by challenging a debatable claim, it must still act reasonably in processing the claim.[14] An insurer's violations of Alaska's Unfair Claim Settlement Practices Act does not require a finding of bad faith, but conduct that is described in that statute-for example, failure to acknowledge and act promptly upon communications regarding a claim, refusing to pay a claim without a reasonable investigation of all of the available information and without an explanation of the basis for the denial of the ...


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